Fairness, trade and free market ideology

Fairness, trade and free market ideology

By Simon Barrow

3 Mar 2008

According to my good 'Christianity with attitude' colleague Giles Fraser, writing in the Church Times, the Adam Smith Institute has "just exploded a bomb under Fairtrade Fortnight" by asking whether fair trade is really efficacious, or whether it is just another way of well-meaning liberals keeping the poor in poverty. I agree with Giles that tough questions need to be asked, but the ones ASI poses are really not very new (Thatcherites were saying the same thing in the 1980s) and instantiating them without also looking at the manifest failures of trickle-down theory, the 'green revolution', what really happened with commodities in the 1980s and 1990s, and the other myths of 'salvation by free markets' is less bold than it claims.

Giles' article, Is Fairtrade the same as fair?, is worth reading, even if - as I do - you end up with a rather different set of concerns. It concludes: "The real moral evil is the way we in the West look after number one by protecting our jobs and markets from competition from poorer countries. Sadly, the Church does little to engage with this sort of argument, as well-meaning churchgoers shell out for more expensive chocolate, but often miss the big picture."

Legitimate point. The evils of the EU Common Agricultural Policy are a case in hand. So is the attempt to restrict movement of people while allowing capital free rein. But then again, left to its own devices, 'the market' (by which, in the real world, as distinct from the fantasy world of certain market fetishists, we mean a set of mechanisms predominantly controlled by the rich and powerful) has a tendency to press down on wages and conditions harder and faster than it levels up through growth - especially if the shape of that growth takes the most profitable aspects of business out of the hands of those with least leverage; and if its extent faces constraints which cannot simply be quantified in financial terms: environmental ones, say. So the idea that there is some straightforward choice between open markets and nightmare regulation, which is where many critics of fair trade on the right are coming from, is really a bit silly.

Giles Fraser goes on approvingly to quote Bill Clinton at the World Economic Forum: “We have to reaffirm unambiguously that open markets are the best engine we know of to lift living standards and build shared prosperity.” Hang on a minute. Unambiguously? This is the voice of ideology, of salvation through markets speaking, not dispassionate analysis. And it is every bit as wonky as the ideology and salvation offered by top-down, state control.

Markets are profoundly messy and ambiguous. That's the whole point. They are not at all pure. This means, for good, that local markets and ground-up entrepreneurialism can lift people out of poverty, and so can some kinds of cash-cropping. But, for bad, corporately dominated markets and other kinds of cash-cropping, just as much part of the 'logic' of markets as anything else, can create impoverishment and deepen structural inequality. This often only gets noticed by the nice rich guys of this world when it involves, say, cropping, processing and selling hard drugs. But from the perspective of the poor, using tough-guy market economics as a standard, that industry makes complete sense. (The answer is not a "war on drugs", however. That's another issue. But it's worth noting in passing that this 'war' is being conducted by free marketeers against, er, 'free markets' - of a kind.)

Similarly, when 'protectionism' benefits the rich - as in the 'competition regulations' that the WEF has championed - it is deemed good, and relabelled 'defending free enterprise'. It is only when things are done to safeguard the poorest and most vulnerable that suddenly they are bad, and responsible for most of the problems manifest within the market system - much of which is actually about its limits, what markets qua markets, even in optimal conditions, can and cannot 'do'. The same applies to boosting wages and dividends, incidentally. Applied to the wealthy, they are 'incentives' and 'good business sense'. Applied to the poor, they 'breed dependency' and are 'corruption'. This is economics written by birds of prey.

As for the idea that price-fixing do-gooders caused the disastrous coffee slump of the 1990s, well, let's see: "The excessive drop in commodity prices in the ’80s, led to a halt in all the price stabilisation mechanisms, and a low point was the discontinuation of the International Coffee agreement in July 1989. In the ’90s, the last two price mechanisms ceased to be, those for cocoa (1993) and rubber (1999). Just when the developing countries needed more support to deal with the commodity crisis, the industrialised countries left them in the lurch, and commodity producers were left to their own devices." Not quite such a simple story, huh? (Oxfam Wereldwinkels, 2001.)

In other words, if we are going to have a serious debate about the larger economic picture, which I absolutely agree with Giles is vital, we are going to have to talk in terms which are far less conveniently selective than those that free marketeers, as much as wholesale anti-globalisation pundits, would have us do. Because there is a lot of hokum out there. Of course, fairer trade alone is not 'the answer', and in some cases it can, like anything else, be implicated in collateral harm. But the principle of levelling up, of re-orienting consumption to social as well as price value, of redistributing wealth, of creating different kinds of investment conditions, of trade as a catalyst for change, is not pious nonsense. It's about using real markets to thwart market ideology and the notion that you can only intervene or refuse intervention if you are 'naturally' strong enough to be able to do so.

But what of the problems? It is true that since Fair Trade has become big business all kinds of dificulties have arisen in the process of something that has been an overall good. Some landowners have cashed in at the expense of tenant farmers (as ASI points out), there have been accusations of supermarket suppliers using sweated Eastern European labour to shift goods which have been ethically sourced earlier in the chain, and so on. It is also true that some big companies (Tate & Lyle is the latest and largest example) have been persuaded to get on board as much by pressure and profits as any free ranging altruism.

But these are arguments for further campaigning and change, not a rationale for giving up on the whole enterprise and allowing a 'free' market system controlled by the haves and frequently deployed at the expense of the have-nots to dictate global economic terms. In fact we should take heart, despite the problems. This year Fairtrade Fortnight is putting on display the huge leap forward (see my comments for Ekklesia) that small-scale individuals, churches, NGOs, community organisations and others have made over the past couple of decades. Back in 1984, when I first got involved, this was a fringe activity for the few. No-one really thought it stood a prayer, apart from a relative handful of activists and some determined entrepreneurs. Now most people have heard of 'fair trade', many are buying the goods, it is mainstream not marginal, and not a few people are getting involved in the broader issues it signals. Cynicism is easy, but hope takes a bit of effort. It's worth it, though.

The Fairtrade Foundation's response to the Adam Smith Institute Report concludes: "We do not deny that properly managed free trade between partners of similar economic strength and power has the potential to drive economic growth. It is the claim that free trade is the only way to tackle poverty that renders it nonsense in the real world of extreme global inequality. Those of us who have had the privilege of seeing and hearing at first hand the difference that Fairtrade makes to poor communities are not going to be persuaded otherwise by the rehashing of simplistic economic theories."

Meanwhile, the market in money, actual and notional, is the one we should really be talking about, since it operates in massive abstraction from the real conditions in which the great majority of people live, buy and sell; and it results in gigantic 'distortions' which rarely get spoken about by the 'market purists'.